THE engineering group which owns Hopkinson's Valves in Huddersfield has revealed it has uncovered evidence of irregular payments in relation to its work for the oil-for-food programme in Iraq.

Weir said an internal review has found £4.2m was paid to a local agent in 2000 as part of work under the United Nations-run programme.

This was on top of normal commissions paid by the group for its activities in Iraq, which included the supply of water pumps and pipelines.

Media reports earlier this year named Weir among hundreds of firms alleged to have paid kickbacks to Saddam Hussein's regime.

According to an article in The Guardian in May, the Saddam regime had insisted on a 10% mark-up on all supplies under the oil-for-food programme since the middle of 2000.

Weir, which has previously denied any anomalies, said the final recipient of the £4.2m was unknown, but it accepted "the sums may have been returned to Iraq".

Chairman Sir Robert Smith said: "It is most regrettable that previous statements, whilst made in good faith, were incorrect. The problem dates back to 2000."

Shares in Weir, whose headquarters are in Glasgow and which employs about 8,000 people worldwide, fell more than 3% following the announcement.

But the company said the new information would not alter its outlook in 2004, which includes a pick-up in orders in the final six months.

Profits totalled £56.7m last year.

The oil-for-food programme was introduced by the UN to enable Iraqi oil exports to take place provided the cash was used for food and medicine.

Weir, which has former Nato Secretary-General Lord Robertson on its board, was granted 37 contracts as part of the programme through overseas business Wesco Dubai.

After an internal review discovered evidence of anomalies, Weir called in independent legal advisers Herbert Smith to carry out a more detailed probe. The investigation, which is ongoing, confirmed irregular payments were made in relation to 15 contracts.

Weir said: "The group's internal review has revealed a number of areas within the group's procedures where improvements can be made."